kaelea inc, has no debt outstanding and a total market value of 90,000 . earnings before interest and taxes , EBIT are projected to be 8,900 if economic conditions are normal ,if there is strong expansion in the economy , then EBIT will be 24 percent higher if there is a recession , then EBIT will be 31 percent lower. the company is considering a 29,000 debt issue with an interest rate of 7 percent. the proceeds will be used to repurchase shares of stock . there are currently 4,500 shares outstanding assume the company has a market to book ratio of 1.0. calculate retur of equity , ROE , under each of the three economic scenarios before any debt is issued, assuming no taxes.

b. calculate the percentage changes in ROE when the economy expands or enters a recession assuming no taxes. c. assume the firm goes through with the proposed recapitalization and no taxes calculate return on equity ROE under each of the three economic scenarios after recapitalization. d. calculate the percentage changes in ROE for economic expansion and recession. e. assume the firm has a tax rate of 40 percent. calculate return of equity ROE under each of the three economic scenarios before any debt is issue also calculate the percentage changes in ROE for economic expansion and recession. f. calculate return of equity ROE under each of the three economic scenarios after the recapitalization, also calculate the percentage changes in ROE for economic expansion and recession assuming the firm goes through with the proposed recapitalization